Romanian, Chinese partners sign agreement on Cernavoda NPP expansion

Romanian, Chinese partners sign agreement on Cernavoda NPP expansion
By bne IntelliNews November 10, 2015

Romania’s state nuclear power company Nuclearelectrica and its Chinese partner China General Nuclear Power Corporation (CGN) signed a memorandum of understanding on the construction of two units at the Cernavoda nuclear power plant on November 9.

Nuclearelectrica says the project, which has an estimated cost of €4bn-€6bn, will contribute to Romania’s energy security. It is also backed by the Romanian government, which owns 82.5% of Nuclearelectrica and wants to turn the country into an energy hub for the Southeast Europe region. However, minority shareholder Fondul Proprietatea, which holds 9.1%, has repeatedly advocated against investment in new reactors, citing shrinking domestic consumption.

The two new units will each have capacity of 700MW, the same as the two existing units at the NPP which were put into operation in 1996 and 2007 respectively. Cernavoda was originally designed to have five reactors and the facilities for the third and fourth reactors are already partly built.

The project cost was estimated initially at €6.45bn when it was sketched out before the 2008 recession, but the cost has repeatedly been revised, and now stands at €4bn-6bn.

“Units 3 and 4 Project will fulfil the long term needs of the energy system corroborated with the decarbonisation targets, ensuring the security of supply, the contribution to a balanced energy mix, the stability and affordability of the price for the end consumer,” Nuclearelectrica said in a press release. The project will also strengthen Romania’s capacity to export electricity.

The MoU was endorsed by Nuclearelectrica’s shareholders on October 22. It establishes the procedures to be followed for setting up, operating and closing the joint venture company that will operate the two nuclear reactors. The two companies have already signed an MoU on the formation of a project company.

CGN was selected under a procedure endorsed by Nuclearelectrica’s shareholders on August 22, 2014. In March, Nuclearelectrica and CGN initiated the MoU, after which the document was endorsed by Nuclearelectrica’s board of directors and approved by the government of Romania on September 2.

After signing the MoU, Nuclearelectrica and CGN still have to complete several steps including negotiating the investor agreement and establishing the project company, in which CGN will hold at least 51% of the capital. They will also decide on the financing structure for the development of the project.

Nuclearelectrica said in a press release on June 16 that it wants a project that will address changes in the European Commission's energy policy, but that will also address consumers’ needs and iron out market imperfections that are detrimental to companies and consumers. More specifically, Nuclearelectrica wants state aid in the form of guaranteed prices for the new company.